Safe and Sound

Audubon State Bank

Audubon, IA
4
Star Rating
Founded in 1876, Audubon State Bank is an FDIC-insured bank headquartered in Audubon, IA. Regulatory filings show the bank having equity of $12.6 million on $105,953,000 in assets, as of June 30, 2017.

Thanks to the efforts of 16 full-time employees in 2 offices in IA, the bank currently holds loans and leases worth $79.8 million, including $44.9 million worth of real estate loans. The bank currently holds $91.2 million in deposits from U.S. customers.

Overall, Bankrate believes that, as of June 30, 2017, Audubon State Bank exhibited a good condition, earning 4 out of 5 stars for safety and soundness. Keep reading for an analysis of how the bank faired on the three important criteria Bankrate used to score U.S. banks.

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THE INSTITUTION'S SCORE

Capital Score

Capital is a crucial measurement of an institution's financial fortitude. It works as a cushion against losses and provides protection for depositors when a bank is experiencing financial trouble. When looking at safety and soundness, more capital is preferred.
Audubon State Bank finished below the national average of 13.38 on our test to measure the adequacy of a bank's capital, scoring 10 out of a possible 30 points.

One way to measure this buffer is looking at a bank's Tier 1 capital ratio. Audubon State Bank's Tier 1 capital ratio was 12.01 percent, above the 6 percent level regulators consider adequate, but below the national average of 25.16 percent. A higher capital ratio means the bank will be better able to weather financial headwinds.

Overall, Audubon State Bank held equity amounting to 11.92 percent of its assets, which was lower than the national average of 12.10 percent.

Asset Quality Score

This test is intended to try to understand how the bank's loan loss reserves and overall capitalization could be affected by troubled assets, such as unpaid loans.

A bank with extensive holdings of these types of assets could eventually be forced to use capital to absorb losses, shrinking its equity buffer. It also means that there are likely to be many assets that are in non-accrual status and no longer earning interest for the bank, diminishing earnings and increasing the chances of a failure in the future.

Audubon State Bank exceeded the national average of 37.62 on Bankrate's asset quality test, racking up 40 out of a possible 40 points .

A handy indicator of asset quality is the percentage of problem assets a bank holds compared to its total assets. As of June 30, 2017, 0.14 percent of Audubon State Bank's loans were noncurrent, meaning they were more than 90 days past due or were in non-accrual status. That's below the national average of 1.04 percent.

Banks maintain a reserve known as an "allowance for loan and lease losses" to deal with troubled assets . Comparing the the size of that reserve to the total amount of at-risk loans can be a widely used indicator when evaluating a bank's ability to manage problem assets. Unfortunately, the FDIC did not provide information on Audubon State Bank's loan loss allowance in its most recent filings.

Earnings score

A bank's earnings performance has an effect on its long-term survivability. Earnings may be retained by the bank, giving a boost to its capital cushion, or be used to deal with problematic loans, potentially making the bank better able to withstand economic shocks. Obviously, banks that are losing money are less able to do those things.

Audubon State Bank scored 14 out of a possible 30 on Bankrate's earnings test, failing to reach the national average of 16.52.

Return on equity, calculated by dividing net income (essentially, profit) by the total amount of equity, is one key measure of a bank's earnings. The most recent annualized quarterly return on equity for Audubon State Bank was 7.23 percent, below the national average of 9.28 percent.

For the twelve months ended June 30, 2017, the bank recorded net income of $420,000 on total equity of $12.6 million. The bank had an annualized return on average assets, or ROA, of 0.78 percent, below the 1 percent deemed satisfactory in accordance with industry standards and below the average for U.S. banks of 1.14 percent.

WHAT IS SAFE & SOUND?

Bankrate.com's Safe & Sound Ratings provide a star rating system to evaluate the current financial status of financial institutions. The information gathered about banks, credit unions and thrifts is updated as set forth in the Terms of Use of Safe & Sound Ratings and Reports. The Safe & Sound Ratings information is grouped by categories of banks, thrifts and credit unions.

Scoring methodology

Bankrate.com evaluates the financial condition of institutions and assigns a one- to five-star rating for each with five stars representing the highest rating. Institutions with satisfactory performance will generally receive a rating of three or more stars. The majority of institutions fall into the three- to four-star range. An institution with an "NR" rating may be too new to rate or may have limited the publicly available information in their regulatory filings. The "NR" is not an indication of financial strength or weakness. The Safe & Sound rating is believed to be reliable, but the information is not guaranteed. In addition, events since the information was collected may have altered the institution's financial condition.